Interesting Pros and Cons List: Human Trader vs Forex Bot

human hand shake with robot

Forex traders always debate which trading method is better: is it trading the financial markets manually or is it better to use trading robots?

Many people might be very stubborn about this regardless on which side they choose, so before I give you the pros and cons of a human trader and a trading robot let me give you few words about the robots as a big picture.

The trading robots I refer to are not only the ones you might know, the ones that give ridiculous profits, and the ones that you and me would call a scam as soon as we see its website. Yes, those robots exists and they seem to be popular, but this is because many people are looking for shortcuts to riches. So as long there is a demand for such product there will always be someone who is trying to sell them.

But what I would describe as a perfect trading robot is the one that you create yourself. You might be a programmer who spends hours, weeks and months creating a robot that works for you, or you could be a manual trader who had his own trading strategy programmed into a robot by a skilled professional programmer.

So in other words I see a trading robot as a computer software that was designed specifically to follow your requirements and your trading rules. So it’s like another version of you, it is just automated and all it does is analyze and trades in the financial markets 24 hours a day. You could spend 24 hours a day too, but obviously this won’t last for long.

And also have in mind that a trading robot can be fully automated or it can be semi-automated. It can also be fully automated, but you can enable and disable it whenever you feel you need to do so. It’s like having an employee that never sleeps and never gets emotional and just does what you tell him to do.

Some might refer to trading robots as automated trading systems, some may call them expert advisors (MT4 term), other just call them Forex robots–no matter what name you use it describe the computer software that can be semi-automatic or fully automatic, they can be programmed to make your life easier.

Advantages of Automated Trading Systems (Robots)

Let’s start off with the advantages of using an automated trading system. Remember that each trader is different and what works well for someone else you know in the business may now work well for you.  We all have to find out own way in trading.

1. Operates on a set of rules without greed, fear, ego or bias.

Unlike humans, trading robots will never be misguided by emotions, and unaffected by the trader’s psychology. Trades are executed automatically once trade rules are met. It follows all your trading rules no matter what’s the market condition. It won’t panic in a losing trade or revenge after a huge loss. It won’t jump back in the markets after a big win to make more money. It plays out your rules without clouding up the trading process with emotions. Let’s face it, as humans we are basically emotional beings and it is not uncommon to get emotional when we suddenly lose a trade for instance and this might affect our performance when we place the next trade, but with robots you can be sure that all the rules are followed in spite of any previous trades.

Automated trading is an excellent way to build up confidence about the market to prevent emotions and psychological issues from affecting trading decisions.

2. Monitors the market 24 hours a day.

Let’s be honest here on this one too because some people just don’t have ANY time for trading because of their busy schedules.  Some of these same people look to robots to trade for them because of this great time disadvantage they face.

You don’t have to worry anymore if you have missed some trading opportunities since the forex robot will do the monitoring for you. Automated trading systems can take trades day and night, and do not miss trading opportunities. It monitors the markets for you every second on a 24/5 basis without any intervention. You don’t need to be glued on your screen and analyze the right chart close enough for potential trade setups. Your EA gives you the power to monitor dozens of forex pairs at once with the ability to identify and react to trading opportunities immediately. It is able to open and close trades according to your trading strategy while you are engaged in some other human activity. This is a great way for you to save time and do other more profitable ventures or activities indeed. Simply put, you don’t metaphorically become a slave to trading in order to gain some profit.

3. Identifies and reacts to opportunities faster.

Getting in or out of a trade a few seconds earlier can make a big difference in the trade’s outcome. A Forex robot executes trades in a fraction of a second and profits from sudden market movements. It uses the speed of the computer to monitor the markets and identify trading opportunities based on coded rules, and execute based on these rules in fractions of seconds. As soon as a position is entered, all other orders are automatically generated, including stop losses and profit targets. You will see that you will never run out of trading opportunities.

4. Consistently carries out the trading plan.

It is undeniably true that the ability to stick to the plan makes the difference between a profitable trader and an unprofitable trader. With automated trading, you can be assured that the robot will be completely disciplined to stick to the plan no matter what the market condition is. It is designed to stick to the plan without exceptions.  If you think you are not able to stick to the plan at all times, when you use a robot you don’t have to worry about this because the robot is always an expert when it comes to this matter.

But this at the same time is a huge disadvantage when the markets get rocky or the style of trading does not fit with current market conditions.  We’ll talk about this more later, but just make sure to not rely on this ‘robot discipline’ too much.

5. Executes trades error-free.

What’s even more amazing when you use a robot is that it will not only stick to the trading plan, but will always execute trades correctly. A robot won’t take a sell when it should be taking a buy, it won’t enter the wrong lot size and it won’t miscalculate the stop loss and take profit parameters. If you do the trading yourself there are times when you will definitely execute trades incorrectly, but with a robot you can avoid this.

Note: This is usually the case, but there are many things that can come up and cause errors in robot performance including broker-server connection issues, internet connection issues as well as MT4 trading robot problems. Spread spikes can throw off performance as well as a number of other potentials. In real-world experience, robots can sometimes run into trouble too.

6. Diversify trading.

If you are searching for ways and means where you can maximize your trading potentials in such a way that you get to trade more in a jiffy, then forex robot is the answer to your search. A robot monitors dozens of currency pairs at once and does it more efficiently and effortlessly than a human trader. It has the ability to scan for trading opportunities across a range of markets, generate orders and monitor trades. It also gives you the power to trade multiple accounts or various strategies at one time. This might sound unbelievable to you but for a robot this is absolutely doable.

Advantages of Manual Trading over Automated Trading

Although automated trading has all of these advantages, I can still say that we cannot underestimate the advantages of manual trading since these are based on the innate human intellect of which a robot does not possess. Here then are some of the best points that you might consider as well.

1. Challenges your discipline and psychology.

As what I have pointed out earlier, automated trading programs offer some advantages over the human mind, mainly in the realm of trading psychology and trading emotions. However, the only main thing that a human trader has that a trading robot doesn’t is a brain. This basically means you can also use your brain to work to your advantage after learning all there is to learn about trading and use this knowledge. After all, the robots were once an idea that originated from the human mind.

2. Executes decisions perfectly or near-perfectly.

You must know that although the robot can do amazing tasks, the human can even do more than what a robot does. Where a trading robot can only execute trading decisions based on the conditions that programmed into it, a human can take into account everything that is going on, including fundamentals that may occur unexpectedly, and process it together.A trading robot doesn’t read and interpret the news and this is a big inconvenience because news is a very important part and plays a very important role in forex trading. Thus, you can actually use what you see in the news to your advantage since your brain is more flexible and can adapt to sudden changes unlike a robot that has been programmed from the very start.

Note: There are some news filters that some robots have which can adapt the performance of a robot (or pause its trading altogether) when there is a high impact news event happening or coming soon.

3. Some rules need to be broken.

Robots work in terms of a system and rules to follow and they have a patterned thinking if we can call it that, so unlike the human brain it cannot read deeper into things. This is the reason why a human can see if the market is moving awkwardly slow or unreasonably erratic and pull out his trades. Most robots are mathematically based, and work best on trending markets. Most are vulnerable and get chopped up themselves when the markets become choppy or move sideways. So points off when it comes to market adaptability for the robots.

4. Robots are always missing intuition—the experienced trader’s “sixth sense”

Lastly, as robots don’t have any emotions, they do not have the “intuition” that every trader must have at some point in time which is also an essential part of trading. A human trader can get a feel for the market. There is a lot more that goes into deciding to pull the trigger on a trade than what a computer program can calculate. A large part of Forex trading success is gut-feel, and it is really something that you as a trader need to develop.

Those who have this gut feel are not likely to want to use trading robots in the first place. They are highly skilled traders who can earn good money in the markets.  Some who buy trading robots are able to make good money too—if they trade with sound risk management and ‘get lucky’ with the robots they purchase.

Robot Trading vs Manual Trading

I believe forex traders have one thing in common and that is, finding the best way possible to maximize their profit. As a forex trader for many years, I have tried and seen what works best for me through a series of experiments and testing. There is actually no right or wrong method of trading as it depends for the most part on what method works best for each individual trader. You must have heard some traders say that robot trading has served them well, while others still prefer to trade manually as this has worked best for them. If you come to think of it, traders have their own reasons why they use a particular method. After weighing the pros and cons, I have finally found what has served me well throughout my career as a trader and software creator. To help you make the right decision and to give you a good idea on how to choose a trading method that works for you, here are some points to share. Read on…

If you have not used a robot for trading, have you ever wondered why some traders use it? There is actually something interesting about using a robot. Basically, the convenience of using a robot is what sets it apart from manual trading—that, and the distance of emotion. Many differences exist between using a robot to open and/or close trades and being an active human trader.

Using a robot automates the trading process so much so that specific platforms exist to enable traders to mirror other users’ trading strategies. This is technically considered robot trading by some. No user input is required except when the user selects a strategy to add to their portfolio and then activates it. The software will then watch for trade entry signals from that strategy. When one is detected, a trade is opened on the account that is mirroring the signaling account. Statistics for each strategy are available for research purposes and recent performance history is readily accessible. With this feature, you will only have to decide on what strategy to use and let the robot (or human trader on the other side) do its work.

That is what I do on Vavatrade. I sell trading signals that my trading robot generates automatically.

Note: The great danger with copying signals is that, just as the classic warning states, past performance is no guarantee of future gain.  Even if a signal provider or robot has done well in the past, it does not mean that it will do well in the future.

Trading robots can take into account data from technical indicators such as stochastic type oscillators, Moving Average Convergence/Divergence (MACD) histogram indicator, key Fibonacci retracement levels, support and resistance levels and pivot points. It seems there are no limits to how complicated trading robots can become in the hands of a skilled programmer. This way, forex trading robots are extremely versatile and can generate large profits with minimal involvement from the trader. If it is your wish to trade but don’t have enough time to do it yourself, this would help you a lot (so long as the robot is profitable of course).

Although robot trading in some aspects can be beneficial, you must remember that a coin has two sides and this is also true with robot trading.  A robot can only do so much. Robots do not take into account price action. According to many successful traders, no robot or technical indicator can give them more information on market conditions than plain and simple price action.

Sure robots can be programmed to analyze price action, but they will never do it the way humans can do. No trading robot is able to see the charts as humans do.

Risk Using Robots

But there is more to the story than just this: sometimes it is hard to control risk with robots. Potentially disastrous situation that could arise when using trading robots is the dreaded margin call. A margin call occurs when your account value depresses to a value calculated by the broker’s particular formula. All trades that are open at the time are closed to ensure that the trader never experiences a negative account. Not doing so would create a situation in which the trader would owe their broker money after losing every dime they had deposited to begin with. Obviously, that is to be avoided at all costs. Brokers understand that. The margin call is a totally automatic process that protects traders from this nightmare situation. The margin call is especially dangerous when traders use robots to trade because robots can be programmed to open more than one trade at a time.

Now of course it is possible to program a robot to monitor free margin of the account it is trading on, but most of the robots don’t have this or are not very good at this. This is something that is kind of hard to test, so in many cases programmers do not put much effort into this.  This is not to say that human traders would not experience the same situation, as this happens all the time. However, when there is a human brain and logical thought behind each trade, more caution is usually exercised than that which a robot can provide.

Conclusion

How much time can you commit to trading? How much effort are you willing to put in? How much time could you afford to spend on trading? Many traders enjoy watching charts, studying technical indicators and eagerly awaiting a major news event or press release. Using a robot completely removes these factors for the trader and therefore may not fit everyone’s preference. If a trader is looking to make money with next to no involvement, robot trading may be the right choice. However, if the trader enjoys the process of seeking out trades and making judgment calls based on the information they see in charts then robots may seem boring to them.

It seems pretty obvious that if you are the kind of trader who doesn’t mind spending a bit of your time or even more and enjoys the process of analyzing the indicators and charts, then forex robots will be of no use to you. However, if you don’t want to delve deeper into the trading process and would rather spend more time watching your favorite sports on TV while accepting some trade wins and losses, then forex robots may be what you just need after all.

What do you like to trade with?  Do you use robots to trade, and how do they work for you if you do?  I’d love to hear about it and so would the other readers.  Please share if you have a robot that is working well for you and driving in some good success.  Thanks for reading and learning more about robot trading!

About the author

Rimantas Petrauskas

First I am a father, a husband and then the author of the book “How to Start Your Own Forex Signals Service”. I am also a Forex trader, a programmer, an entrepreneur, and the founder of ea-coder.com Forex blog. I have created two of the most popular trade copiers and other trading tools for MT4 that are already used world wide by hundreds of currency traders.

16 Comments

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  • Fully agree what you say. But I am not sure about MT4 platform for the long term. May be cAlgo will be better use in the future.

    • Isaac, thanks for commenting. I used MT4 because this is the platform I write apps for. Personally I do not use cAlgo so cannot say anything about it, but I heard a lot of positive things about it from my customers. And you just gave another thumbs up for cAlgo as well 😉

  • Good article as usual Rimantas. A few good points there. As you know, I have my EAs built by my Programmer based on my own trading systems. Basically just use a couple of custom technical indicators and a higher time frame for filtering. Pretty basic really. I have no problems at all with my EAs taking the entries, however I’m not so confident of the EAs looking after trade management and exits, so therefore I tend to use them in a semi-auto mode. But having said that, I will set them up to manage the trades and exit if I can’t get to my trading platform.

    The problem with letting the EA manage the trades, is that there is no one size that fits all. When you back test using the Strategy Tester on MT4, what inputs that worked well in 2012 for a certain strategy may not work so well in 2014. The market is always evolving, whether it be by volume, volatility or trends. Not sure how to get around this, maybe test your settings every couple of months or so and just keep on tweaking them. At the end of the day, it is purely a numbers game where you want to win more than you lose, and keep the fear and greed out of it. EAs help me with this so that’s why I use them. Cheers.

    • Jim, my advice would be to work extra on your EA and try to make it dynamic. What I mean is that EA should adopt itself to a new market conditions. If markets move in tight ranges – EA should use smaller stops. If markets move in bigger ranges – EA should use bigger stops. When trend has been identified it should switch to another trading mode.
      It sounds simple, but hard to code. However, it is obvious that such extra work is worth it as finally you may get an EA that will make you money in the long term even when markets change.

      Regards,
      Rimantas Petrauskas

    • Dear Ariel,

      unfortunately I do not give any recommendations for the EA’s. It is very easy to ruin your trading and even blow your account if you use the wrong EA.
      I would try to avoid anything that promised quick riches and look like scam.
      In fact, I will be releasing an eBook about how to identify Forex scams, so stay tuned if you are interested 😉

      Regards,
      Rimantas Petrauskas

  • Hi Rimantas, i am looking for a profitable forex robot for
    trading, please can i purchase one of your best robots
    to help me trade.
    Regards.

  • Hi Rimantas do you think you can program a same concept EA as Icefx TraderAgent http://www.icefx.eu/traderagent/ . I am not asking you to hack but do the same strategy as them. I would like to even add more idea into it. If you are able to code that then i will email you for a price quote.
    Regards

  • dear RIMANTAS, THANKS FOR YOUR EXCELLENT ROBOT ARTICLE. KEEP UP THE GOOD WORK ,,. KIND REGARDS ,, BE BLESSED ..george

  • Hi Rimantas,

    Great article that really summarizes the situation well. One of the things I am personally really into is the potential fusion of the two sides. Simply put, there is no doubt the computer is better at executing your strategy, however, it takes a person to turn on/off the strategy. Also, it takes a person to know when to tweak the strategy if market conditions are “moving awkwardly slow or unreasonably erratic”.

    So, if the person has access to a platform where this is possible to do really quickly/easily (meaning, no time for heavy programming), that person should be in an advantage over “slow” EA-based traders.

    Keep up the good work,
    Mikael

    • Dear Mikael,

      thanks for your opinion and for your feedback. I agree with you.

      You too keep up the good work with Magick. It’s ironical how I’ve started to create the same service 3 years ago and did not managed to finish it. We’re still working on it as on a side project 🙂

      Regards,
      Rimantas Petrauskas

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